A mixed bag of results from Unilever today: the consumer goods giant said that although more shoppers have been trading down to cheaper versions of its products, it still managed to record an extremely healthy 5% jump in sales. The figure surprised the City, and was enough to push Unilever's share price up by nearly 8% this morning (despite CEO Paul Polman's continued refusal to give any guidance about future performance). But we can expect to see a lot more adverts on our TVs this year for the likes of Ben & Jerry's, PG Tips and Dove soap, as Unilever tries desperately to convince us that they really are worth shelling out for...
In truth, Unilever's big sales hike is a lot less impressive than it looks at first sight, since all of this growth has come from higher pricing. It charged an average of 6.8% extra for its products last quarter, while underlying sales volumes were actually down 1.8% across the board. Western Europe was apparently the worst performer, down 3.8%; Unilever admitted there had been ‘some down-trading to private label brands', as credit-crunched customers opted for own-brand soap from the likes of Tesco, rather than splashing out on a (no doubt largely identical) premium product from Unilever. As a result, net profits fell 43% to €803m.
Such figures would normally be enough to send the share price spinning, but this morning Unilever's looked as bubbly as a chimp at a PG Tips tea party. For one thing, the drop in sales wasn't as bad as expected, and the revenue jump shows that plenty of people are still happy to fork out a little extra for its brands, despite the continued pressure on consumers' pockets. Meanwhile its international performance looked strong too: Unilever's underlying sales growth rose 8.3% in the Americas, and 9.5% in the all-important developing markets - even as pricing rose 10.5%. So as far as the City was concerned, the news could have been a lot worse.
Still, the drop in sales volumes certainly gives Polman plenty to think about. Principally, Unilever needs to do a better job of persuading cash-strapped punters that they should be spending their hard-earned on premium products (buy cheap, buy twice, as MT's Grandma used to say). So Polman is ramping up the company's advertising budget, to try and grab back some of its lost market share. That's good news for investors, and good news for out-of-work actors and voiceover artists everywhere. Although you might not be enamoured by the prospect of PG Tips advocate Johnny Vegas spending any more time on our screens...
In today's bulletin:
Barclays bounces but Lloyds still a loser
Unilever profits hit by cheapskate shoppers
Editor's blog: Advertising in a global meerkat
'Patronising' Branson ad leaves Virgin staff steaming
The dangers of office politeness